ID 7560
Kroll, Thore: Fourth Party Logistics in Germany
Hamburg: Diplomica GmbH, 2003
Zugl.: University of Plymouth, Universität, MA-Thesis/Master, 2003
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- iii -
ACKNOWLEDGEMENTS
This research project would not have been possible without the help and support of many
people.
First of all I would like to thank my supervisor Dr. Richard Gray who helped me through
the whole research process.
The members of the Delphi panel spent their valuable time in order to provide me with
insights and opinions about the area of fourth party logistics. Unfortunately they cannot be
named for reasons of confidentiality. Nevertheless I am very grateful for their participa-
tion.
Many thanks go to those people who helped me establish contact with industry experts or
provided me with additional information and ideas.
Further I would like to thank my family whose support enabled me to pursue another year
of studying.
Finally my thanks go to my friends in Plymouth. They made this year a very special one.
- iv -
FOURTH PARTY LOGISTICS IN GERMANY
THORE KROLL
SUMMARY
This thesis looks at the fundamental issues of fourth party logistics in Germany. The areas
interpretation, acceptance and potential implementations are covered in particular. After a
brief introduction in Chapter 1, Chapter 2 offers an insight into the topic area in the form of
a literature review. The literature review explains the origins of the 4PL-concept as well as
functions performed by a 4PL-provider. Different types of 4PL-providers and inter-
organisational set-ups are presented. Afterwards the main areas of discussion are identi-
fied. Areas such as outsourcing theory and channel concepts have relevance and are dealt
with as well. Although the 4PL-basics are not necessarily country-specific, the literature
review relies heavily on German sources.
In Chapter 3 a conceptual model concerning the topic is presented and hypotheses are de-
veloped.
In order to test the developed hypotheses, primary data is collected in the form of a Delphi
expert discussion. This process is described in detail in Chapter 4. The logistics experts for
the panel are drawn from shippers, service providers and researchers; the discussion con-
sists of two rounds.
The results of the Delphi process are analysed in Chapter 5 followed by Chapter 6 in which
the hypotheses are tested and conclusions are drawn. The findings can be summarised by
stating that the panellists generally expressed very pragmatic viewpoints. Further, several
of the often-quoted arguments in the 4PL-discussion were weakened by the findings. At
the same time it has to be mentioned that especially the shippers were often split in their
opinions.
This thesis does not aim at ending the 4PL-discussion, but instead hopes to fuel it by look-
ing at certain aspects from different viewpoints.
- v -
CONTENTS
LISTS OF FIGURES, TABLES & EQUATIONS ... vii
LIST OF ABBREVIATIONS USED... viii
LIST OF ABBREVIATIONS USED... viii
CHAPTER ONE: INTRODUCTION ... 1
1.1
Subject background ... 1
1.2
Reasons for choice of subject... 1
1.3
Scope and limitations... 2
1.4
Proposed research methodology... 2
1.5
Statements of objectives ... 3
CHAPTER TWO: LITERATURE REVIEW... 4
2.1
4PL-concept ... 4
2.1.1
4PL-functions ... 4
2.1.2
Differences to 3PL ... 5
2.1.3
4PL within the SCM context ... 5
2.1.4
Inter-organisational structure... 6
2.1.5
Origins of 4PL-companies... 7
2.1.6
4PL vs. LLP ... 8
2.1.7
Existing examples ... 10
2.1.8
Key issues... 10
2.1.8.1
Impact of assets... 10
2.1.8.2
Expertise ... 12
2.1.8.3
Trust ... 12
2.2
Management Theory ... 13
2.2.1
Outsourcing ... 13
2.2.1.1
Core competency... 13
2.2.1.2
Saving potentials ... 13
2.2.1.3
Costs of outsourcing... 14
2.2.2
Transaction costs... 15
2.3
Channel concepts... 16
2.3.1
Channel power & focal company ... 16
2.3.2
Channel conflict... 16
2.4
Client industries... 17
CHAPTER THREE: CONCEPTUAL MODEL ... 18
3.1
Definition ... 18
3.2
4PL-concept and relevant issues ... 18
3.3
Hypotheses ... 19
CHAPTER FOUR: RESEARCH METHODOLOGY... 22
4.1
Qualitative research methods ... 22
4.2
Delphi method background ... 22
4.2.1
Definitions ... 22
4.2.2
Applicability of the Delphi method ... 23
4.3
Delphi process ... 23
4.3.1
Panel members... 23
4.3.2
Survey process ... 25
4.3.3
Consensus ... 25
4.3.4
Design of first round ... 26
- vi -
CHAPTER FIVE: RESULTS & ANALYSIS OF SURVEY... 28
5.1
Analysis of first round ... 28
5.1.1
Response rate ... 28
5.1.2
Consensus ... 29
5.1.3
Degree of consensus by hypotheses... 29
5.1.4
Analysis of first round statements... 30
5.1.4.1
Hypothesis 1: Knowledge about scope ... 30
5.1.4.2
Hypothesis 2: 4PL-provider vs. LLP ... 30
5.1.4.3
Hypothesis 3: Focal company... 30
5.1.4.4
Hypothesis 4: Willingness to outsource ... 32
5.1.4.5
Hypothesis 5: 4PL-arrangements ... 33
5.1.4.6
Hypothesis 6: Assets & expertise ... 33
5.1.5
Formulation of second round statements ... 33
5.2
Analysis of second round... 35
5.2.1
Response rate ... 35
5.2.2
Consensus ... 35
5.2.3
Analysis of second round statements ... 35
5.2.3.1
Hypothesis 1: Knowledge about scope ... 35
5.2.3.2
Hypothesis 2: 4PL-provider vs. LLP ... 37
5.2.3.3
Hypothesis 3: Focal company... 38
5.2.3.4
Hypothesis 4: Willingness to outsource ... 38
5.2.3.5
Hypothesis 5: 4PL-arrangements ... 40
5.2.3.6
Hypothesis 6: Assets & expertise ... 42
CHAPTER SIX: DISCUSSION & CONCLUSION ... 45
6.1
Discussion of results ... 45
6.1.1
Hypothesis 1: Knowledge about scope ... 45
6.1.2
Hypothesis 2: 4PL-provider vs. LLP ... 45
6.1.3
Hypothesis 3: Focal company... 45
6.1.4
Hypothesis 4: Willingness to outsource ... 46
6.1.5
Hypothesis 5: 4PL-arrangements... 46
6.1.6
Hypothesis 6: Assets & expertise ... 46
6.2
Recommendations for further research... 47
6.2.1
Topics ... 47
6.2.2
Methodology... 47
6.3
Conclusion... 48
LIST OF REFERENCES ... 50
BIBLIOGRAPHY... 53
- vii -
LISTS OF FIGURES, TABLES & EQUATIONS
FIGURE 1: Key components of a 4PL-provider ... 4
FIGURE 2: 4PL-arrangements ... 7
FIGURE 3: LLP as part of 4PL ... 9
FIGURE 4: Conceptual model... 19
TABLE 1: Invitations sent... 24
TABLE 2: Delphi panel ... 25
TABLE 3: First round statements ... 27
TABLE 4: First round response rate ... 28
TABLE 5: Degree of consensus by hypotheses ... 29
TABLE 6: Second round statements... 34
TABLE 7: Second round response rate... 35
EQUATION 1: APMO cut-off rate ... 25
EQUATION 2: Round 1 APMO cut-off rate ... 29
EQUATION 3: Round 2 APMO cut-off rate ... 35
- viii -
LIST OF ABBREVIATIONS USED
3PL
Third party logistics
4PL
Fourth party logistics
APMO
Average percentage of majority opinion
IT
Information technology
LLP
Lead logistics provider
LSP
Logistics service provider
SCM
Supply chain management
- ix -
LIST OF APPENDICES
APPENDIX 1: First round email-questionnaire ... 54
APPENDIX 2: First round results... 59
APPENDIX 3: Second round email-questionnaire... 60
APPENDIX 4: Second round results ... 68
- 1 -
1
CHAPTER ONE: INTRODUCTION
1.1
Subject background
Since being developed in the late 1990s, the term 4PL-provider is widely used within the
logistics industry. Quite often other terms, predominantly lead logistics provider (LLP), are
used more or less interchangeably without differentiation. It can be said that a lot of confu-
sion about its functions still exists and every logistics service provider seems to have an
own definition. For an initial understanding, a 4PL-provider can be said to be a new type of
logistics intermediary that offers comprehensive supply chain solutions and, by managing
other logistics service providers, acts as a single point of contact for its clients (Datamoni-
tor, quoted by ELM, 2002, pp.1-2).
Quite often it is said that the functions performed by a 4PL-provider are too critical to be
outsourced. It is still not clear to what extend shippers will accept and implement the con-
cept. A survey performed by Datamonitor in 2002 showed that about two thirds of German
shippers do not consider using a 4PL-provider (ELM, 2002, p.2).
Nevertheless, companies with different backgrounds currently position themselves to take
over the role of a 4PL-provider, and a rising number of 4PL-arrangements are reported in
the media. The companies offering those services differ considerably, ranging from IT-
companies to former warehouse operators. This results in discussions about which compa-
nies are best suited to become 4PL-providers (e.g. Eisenkopf, 2002, pp.5-6).
1.2
Reasons for choice of subject
The 4PL-concept is one of the topics that have started major discussions among the con-
cerned parties. Opinions voiced range from promoting the concept as a panacea for logis-
tics down to dismissing it as a marketing phrase of business consultants and logistics ser-
vice providers. At the same time the terminology used in this context is not yet clear-cut
and a considerable uncertainty still exists. All this makes the topic an interesting area for
research, especially when taking into account that a market research suggests a potential
European 4PL-market of over ten billion Euros (Datamonitor, quoted by ELM, 2002, p.1).
From a personal point of view, the 4PL-concept has been of interest to the author for quite
some time now and has influenced his choice of future profession considerably.
- 2 -
1.3
Scope and limitations
The 4PL-concept is very broad and therefore strict boundaries for the research have to be
set in order to gain meaningful results in the short timeframe of five months. This research
will explore fundamental issues of the concept, such as the definition of its scope, its ac-
ceptance by the industry and different inter-organisational set-ups of a 4PL-relationship.
When investigating the 4PL-concept, one cannot avoid the general areas of supply chain
management and outsourcing. Those areas will be covered briefly where appropriate.
The research is geographically limited to Germany. The country was chosen mainly due to
the author's personal interest. However, this limitation proved to be difficult when choos-
ing participants for an expert discussion. Initially it was sought to include only representa-
tives of German companies, but the transnational nature of many companies and complex
ownership structures complicated matters. This caused the inclusion of some companies,
which are not German, but for one reason or another have a unique link with Germany.
1
When investigating the shippers' perceptions, only representatives of the industry sectors
automotive, chemical/medical, consumer electronics and retail/distribution were consid-
ered.
1.4
Proposed research methodology
This research is divided into two main parts, a literature review and a Delphi discussion.
The literature review will give a thorough insight into the topic area. Main sources of in-
formation will be academic journals, conference papers and articles in commercial publica-
tions, such as newspapers and journals. The information gathered will be used to derive a
conceptual model and appropriate hypotheses for the second part of the research process.
In the second part, primary data will be collected by the means of a Delphi discussion. This
contribution of expert knowledge will provide updated information about the subject area
(Delbecq et al., 1975, p.84), which is still an evolving topic. The discussion panel will con-
sist of logistics experts from three main groups: shippers, i.e. the potential customers of
4PL-services, researchers who should provide a neutral perspective, and finally a group of
"service providers". This last group is meant to include commercial parties who provide
different services to the shippers and may be affected by the 4PL-concept, namely logistics
service providers and business consultants. The shippers will come from different sectors
in order to include a wider spectrum of different requirements in the discussion. The dis-
cussion will include two rounds of questionnaires distributed among the members. The
1
E.g. a large cooperation's European head office based in Germany.
- 3 -
first round will include statements solemnly based on the hypotheses. The second round
will include statements modified accordingly to the comments of the first round.
1.5
Statements of objectives
The main goal of this research project is to explore the interpretation, acceptance and po-
tential implementations of the 4PL-concept within Germany. This includes the following
sub-objectives:
-
Thoroughly investigate the scope of the 4PL-concept,
-
Identify potential benefits and drawbacks of the concept,
-
Identify the different 4PL-arrangements,
-
Analyse different types of 4PL-providers,
-
Develop a conceptual model and hypotheses concerning the topic and
-
Collect and analyse expert opinions from the involved parties about the problem ar-
eas developed earlier.
This will allow drawing conclusions about the viability of the 4PL-concept in general and
the preferred attributes of a 4PL-provider with regards to different industries in Germany.
- 4 -
2
CHAPTER TWO: LITERATURE REVIEW
2.1
4PL-concept
2.1.1
4PL-functions
It is claimed that the consultancy Accenture, formerly Anderson, registered the term fourth
party logistics (4PL) as a trademark in 1996 (Bumstead & Cannons, 2002, p.19). Although
this is disputed, it is accepted that the company invented that term. Therefore the first at-
tempt of explaining the term has to start there. They define a 4PL-provider as (ibid., p.25):
"An integrator that assembles the resources, capabilities and technology of its own
organisation and other organisations to design, build and run comprehensive supply-
chain solutions."
And further as:
"An entity outside the organisation that assembles and integrates capabilities from
other third-parties to achieve transformational efficiencies."
Although this definition has been widely accepted by the industry and the academic world,
the interpretations of that definition differ.
FIGURE 1: Key components of a 4PL-provider
SOURCE: Bumstead & Cannons, 2002, p.20
4PL
Control Room
(Intelligence)
Supply-Chain
Infomediary
Resource
Provider
s
Change Leader
-
Supply-chain visionary
-
Multiple customer relationship
-
Deal shaper and maker
-
Supply-chain re-engineers
-
Project management
-
Service, systems & information integrator
-
Continuous innovation
Decision Maker
-
Experienced logisticians
-
Optimisation engines & decision support
-
Neutral positioning
-
Manage multiple 3PLs
-
Continuous improvement
Information (Nervous System)
-
IT system integration
-
IT infrastructure provision
-
Real-time data tracking
-
Convert data to information
-
Provide info to point of need
-
Technical support
Assets
-
Transportation asset provider
-
Warehouse, cross-dock, property facility
-
Manufacturing outsourcing
-
Procurement service
-
Co-packing service
Architect
Integrator
- 5 -
Accenture (Bumstead & Cannons, 2002, p.20) states that a 4PL-provider fulfils four func-
tions. First it acts as a strategic architect and integrator of the supply chain, which includes
supply-chain re-engineering and a continuous process of innovation. Secondly a 4PL-
provider is the operational manager of the supply chain. It manages other 3PL-providers
from a neutral position and optimises the supply chain operations. Thirdly a 4PL-provider
is in charge of the IT-system and manages all information-related issues. Finally the 4PL-
provider supplies the resources required within the supply chain. This ranges from tradi-
tional transport to manufacturing and procurement services.
2.1.2
Differences to 3PL
The main difference to a traditional 3PL-provider is that the 3PL-provider is normally re-
stricted to a part of the supply chain. A shipper would therefore employ several 3PL-
providers to perform different logistics functions. A 4PL-provider on the other hand acts as
a process integrator and reduces the number of interfaces for the shipper. This also hides
complexities of logistics processes from the customer (Eisenkopf, 2002, pp.2-3). Eisenkopf
further states that 3PL-companies always rely on own assets.
A major 3PL-provider in Germany stated that in its experience some clients perceive 4PL-
services as an evolution of traditional 3PL-services and not as a new concept. It is further
said that customers start to purchase partial 4PL-services from their 3PL-provider
(Feldmann, 2002, p.3).
This tendency has caused several 3PL-provider to invest in new IT-systems in order to
cope with the clients' requests. However, this upgrading of a 3PL - to a 4PL-provider may
cause problems. The 3PL-provider may have to little expertise in the area of IT and con-
sulting. Further, their ownership of assets may negatively affect their neutrality when it
comes to developing the best solution for the customer (Delfmann & Nikolova, 2002, p.3).
It may be worthwhile to find out whether a real difference between 4PL- and 3PL-services
is perceived within the logistics industry.
2.1.3
4PL within the SCM context
Quite often a 4PL-provider is said to undertake the management of a complete supply
chain. However, supply chain management (SCM) may be defined very broad. Christopher
(1998, p.18) for example defines SCM as:
- 6 -
"The management of upstream an d downstream relationships with suppliers and
customers to deliver superior customer value at less cost to the supply chain as a
whole."
When quoting Houlihan (1986), Schary & Skjott-Larsen (2001, p.29) on supply chain
characteristics, it is mentioned that the supply chain is the whole process for providing
goods to the final users. Therefore the scope of supply chain operations includes procure-
ment, production, distribution, etc. Specifically for a global supply chain, Delfmann &
Albers (2000, pp.25-6) add additional complexities such as forecasting problems due to
several cultures involved and macroeconomics uncertainties such as exchange rates.
It is therefore reasonable to argue that SCM does not only include the logistics aspect, but
also other issues such as supplier & customer relationships. If taking this view, one has to
keep in mind that a 4PL-provider's responsibility would be limited to the logistical ma n-
agement of a supply chain (Eisenkopf, 2002, p.3).
To appreciate the 4PL-concept it is crucial to understand the concept's scope and it may be
interesting to see how the concept is understood within the industry.
2.1.4
Inter-organisational structure
According to Accenture (Bauknight & Miller, 1999), the 4PL-market can be segmented
with regards to the set-up of the inter-organisational structure. The different set-ups are
called Synergy Plus, Solution Integrator and Industry Innovator.
The Synergy Plus model is built upon a partnership where a 4PL-provider operates inside a
3PL-provider. Both organisations combine their market reach and capabilities, with the
4PL-provider complementing the 3PL-provider's capabilities.
A Solution Integrator is a 4PL-provider that manages an integrated supply chain for a sin-
gle client. It is the core model of the 4PL-concept in which the 4PL-provider combines the
resources and capabilities from several 3PL-providers.
The last and most complex set up is the Industry Innovator. Here a 4PL-provider develops
and runs supply chain solutions for several clients within an industry.
A major question to be asked is how the actual 4PL-organisation is created. In one of the
very early contributions to the discussion, Gattorna (1998, pp.431-3) suggests that a 4PL-
provider is established as a joint venture or long-term contractual relationship between
several entities. A primary client contributes assets, capital and operational expertise to the
venture and also purchases the 4PL-services. At least one other company, e.g. a 3PL-
provider, consultant or IT-company, takes part in the initial set up of the 4PL-organisation.
- 7 -
Gattorna further argues that two initial primary clients increase the 4PL-prvoider's chances
of success. This allows for immediate economies of scale and scope. Additionally it creates
an image of independence, which may attract clients in the future.
FIGURE 2: 4PL-arrangements
SOURCE: Accenture (as presented by Thorby, 2001b, p.45)
All different possibilities have positive and negative aspects while at the same time the
4PL-arrangement will have a huge impact on the involved organisations. Up to date it is
not clear which arrangement will prevail.
2.1.5
Origins of 4PL-companies
Many companies that currently position themselves in the 4PL-market are not new start-up
companies. Instead they are established companies that chose to expand their traditional
service range. Those companies have a large variety of backgrounds. Eisenkopf (2002,
pp.4-5) lists 4 different origins and quotes Baumgarten et al. for their specific advantages
and disadvantages:
· First of all are management consultancies, with Accenture being the creator of the
term 4PL. Their main advantage is their competency in performing process analysis
and concept development at a strategic level. Further, since consultancies have no
logistical assets, their neutrality is strengthened. Their main disadvantage is the
lack of operational logistics expertise to implement and manage the proposed sup-
ply chain concept. This also negatively influences their ability to actually fulfil the
logistical requirements of the client.
· Very similar to consultancies are IT-companies, which have their roots in develop-
ing supply chain tools and IT-based consulting. Their main advantage would be the
competency to develop and implement the IT-system within the supply chain. Oth-
erwise the arguments named above apply as well.
Synergy Plus
SP
4PL
C
1
C
3
C
2
C
4
Solution Integrator
4PL
C
SP
SP
SP
Industry Innovator
4PL
SP
SP
SP
Client
4PL
Service Provider or 3PL
C
4PL
SP
C
1
C
3
C
2
C
4
- 8 -
· The other main group of players are the traditional 3PL-providers, which evolved
to offer 4PL-services. Their main advantage is their operational logistics expertise
for operating complex logistics services. Further, their assets may act as a guarantee
that the logistical requirements of the client can be fulfilled. However, their assets
equally form a disadvantage, since they affect neutrality and reduce the 4PL-
provider's flexibility.
Another disadvantage may be the lack of expertise to develop strategic concepts as
well as limited IT-resources.
· The final group of potential 4PL-providers are manufacturers from within the sup-
ply chain. In this kind of forward integration, the logistics department of the domi-
nating supply chain member extends its responsibilities. This set-up has not yet
been discussed in depth. However, the automotive industry is perceived to be a
good example. The main advantage here would be, that the company acting as 4PL-
provider actually has the power to transform the supply chain. However, this also
leaves doubts about the possibility to achieve an overall optimised supply chain.
When looking at the 3PL-providers, the classification may be too broad, since they have
very different origins. It may be helpful to create sub-classes. Based on Eller's analysis of
fashion logistics (2002, p.51), the main 3PL-players in the 4PL-context may be classified
as:
· Asset-based dedicated logistics operators, such as Exel or integrators like UPS,
· Global forwarders such as Kühne & Nagel, which are largely free of physical as-
sets,
· Maritime subsidiaries, such as Maersk Logistics or Cargo System.
The different origins of 4PL-providers are often at the centre of intense discussions, espe-
cially among the providers. Just like above, no answer has yet been found.
2.1.6
4PL vs. LLP
Within the area of the 4PL-concept, several different terms, such as lead logistics provider
(LLP) or supply chain integrator, are used without much differentiation. However, it seems
that the terms 4PL-provider and LLP dominate the discussion. A LLP is a 3PL-provider
that acts as a "general contractor" and sub-contracts out to other 3PL-companies. Arm-
bruster (2002, p.11) claims that LLP is actually a better term than 4PL-provider. It seems
however, that Armbruster contradicts himself with this statement. In his definition the LLP
does not perform the strategic design of the supply chain but is restricted to the other three
- 9 -
functions identified earlier (see Figure 3). This limitation is recognised by Lieb & Hickey
(2002a, p.5) who define a LLP as a 3PL-provider that manages all other 3PL-releationships
for the client.
FIGURE 3: LLP as part of 4PL
SOURCE: Author
Some writers challenge the view of differentiation according to scope of function. Instead
the focus is the company's origin. Benz & Lindner (2002, p.3) argue that the difference
between a 4PL-provider and a LLP is, that the latter actually owns logistics assets or has
long-term contractual access to those resources. In this case the LLP quite often has its
roots in 3PL-services. Unlike in the previous differentiation, the LLP may actually be in-
volved in strategic issues. An example for this interpretation is logistics service provider
Kühne & Nagel, which calls itself a lead logistics provider and does in fact offer strategic
supply chain re-engineering (Kühne & Nagel, 2003).
A similar view on LLP seems to be taken by the car manufacturer Ford in Europe. Here
two asset-based logistics providers are involved in developing a LLP-concept for external
logistics, including strategic supply chain design. It is however required, that the solutions
are not driven by the assets (Kluger, 2002).
The question of `What is in a name?' can be quite important. In this co ntext it has to be
investigated whether or not a real difference between the names can be recognised.
4PL-Funtions
Strategic Architect
Design & re-engineer supply chain network
Negotiate contracts with 3PL
Change management
LLP-Functions
Operations Management
Resource Management
Conduct & optimise
Transport & warehouse
3PL performance evaluation Outsourced manufactur-
Manage 3PL relationships
ing & procurement
Information Mgmt
IT systems integration
Real-time visibility
Data-information management
Ende der Leseprobe aus 79 Seiten
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- , 2003, Fourth Party Logistics in Germany, Hamburg, Bedey Media GmbH, https://www.diplom.de/document/222839
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